TaxTMI 
TaxTMI 
2021 (5) TMI 901
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....the basis of various details furnished before him, disallowed an amount of Rs. 3,91,936/- u/s 40A(3) out of car repairs and maintenance and determined the total loss of the assessee at Rs. 94,25,270/- as against the returned loss of Rs. 98,17,203/-. 3. Subsequently, the ld.PCIT called for the records and examined the same and noted that no revenue from operations has been shown by the assessee during the relevant financial year and the assessee has only shown 'Other income' of Rs. 4,50,030/- which consists of exempted agricultural income of Rs. 2 lakh and 'Other income' of Rs. 2,00,030/-. However, the assessee has claimed depreciation of Rs. 71,11,250/-, finance cost of Rs. 14,92,076/- and 'Other expenses' of Rs. 17,32,848/-. Further, the 'Other expenses' of Rs. 17,42,000/- includes Rs. 7,91,514/- towards vehicle running and maintenance expenses. He further noted that the assessee has received unsecured loan from the Director Shri Vinod Kumar of Rs. 15,40,80,000/- and has also given inter-corporate loans/advances to sister concerns. He further noted that the AO has not examined the application of the provisions of section 2(22)(e) of the Act in the context. He, therefore, issued....
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....and/or dealt with the detailed submissions made during the proceedings under section 263 of the Act and has gone by extraneous, irrelevant and incorrect facts and contrary to the material placed on record during proceedings u/s 143(3) and section 263 of the Act. The action of the Ld. Pr. CIT is wholly unreasonable, uncalled for and bad in law. 7. The Appellant craves leave to add, amend, alter vary and / or withdraw any or all the above grounds of appeal. 8. The appellant prays that the Order passed by the learned Pr. CIT u/s 263 of the Income tax Act, 1961 may be ordered as illegal, invalid and void abinitio." 6. The assessee has also filed the following additional grounds:- "1. On the facts and circumstances of the case the Assessment Order passed under section 143(3) and further revised by the CIT under section 263 of the Act is void, as the impugned year is the year of search and the AO ought to have framed the assessment under section 153B (1) (b)/143(3), which provisions are exclusively applicable for framing the assessment of the year of search. 2. On the facts and under the circumstances of the case, the jurisdiction assumed by the CIT....
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....ssment year does not fall under the ambit of section 153C of the Act. Now, being advised, the assessee is raising this categorical ground and prays that the same should be admitted in the interest of justice. He accordingly submitted that the delay in raising the additional grounds should be condoned and the same should be admitted for adjudication. 8.1 After hearing the ld. DR and considering the argument of the assessee for admission of the additional grounds, we admit the same for adjudication. 9. The ld. Counsel for the assessee submitted that the assessee is a private limited company incorporated on 15.12.2006 and is engaged in real-estate business. A search and seizure action was conducted by the department on Krrish Group on 9.11.2011. Accordingly the revenue has reopened the assessment of assessee for AYs 2006-07 to 2012-13 which is evident from the copy of satisfaction note placed at Page No-2 of the Paper Book. The ld. Counsel for the assessee drew the attention of the Bench to following dates which according to him go to the root of the matter: - DATE Sequence of event j Page no of PB 30.09.2014 Assessee Company filed its ROI for the impugned year de....
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....what is wrong in the present assessment as the same has also been framed under section 143(3) and the year of search is also to be assessed u/s 143(3). He submitted that assessment of search year for the person covered by 153A and 153C are to be framed by the AO who has assessed the Block period and not by the AO who was regularly assessing the assessee before Centralization of cases. The ld. Counsel for the assessee submitted that in the case of assessee, the assessments of years which were framed after centralization were framed by the AO of Central Circle-1, Faridabad (Copy of orders of AO at Page No 15 of Paper book-2) and the impugned year assessed by the AO Central Circle-1, Gurgaon. Therefore it is abundantly clear that impugned year has not been considered as part of block of 7 years rather assessed as normal year, which is patently wrong, in the light of the provisions of section 153B and 153D. He submitted that in the present case the AO has framed the assessment under section 143(3), which provisions are exclusively meant for regular assessments and not for assessments covered by the provisions of section 153A. He submitted that assessments covered u/s 153A are governed ....
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....so to section 153C the limitation of the case would expire on 31.03.2015. However, the order has been passed by the AO on 30.08.2016 which is the subject matter of 263 proceedings. 9.4 The ld. Counsel for the assessee accordingly submitted that entire exercise of 263 is bad in law on account of the assessment order being barred by limitation. Referring to the decision of the co-ordinate bench of the Tribunal in the case of NKG Infrastructure Ltd Vs PCIT - ITA No-3825/Del/3827 he submitted that the Tribunal has held that since the original order of assessment is time barred, action of 263 is a nullity. 9.5 The ld. Counsel for the assessee in his next plank of argument submitted that as the impugned year is a search year, as held by the ITAT in assessee's own case, therefore the AO ought to have framed the assessment in the manner provided for assessing search year and one of the most important condition for assessing the year of search is approval of JCIT as per the provisions of section 153D of the Act. He submitted that the AO in the present case has not obtained any approval from the JCIT before passing the order of the assessment of impugned year and hence the entire or....
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....ollowing chart, the ld. Counsel submitted that the assessments of Shri Vinod Ambawatta were completed u/s 153C, by Central Circle Faridabad along with that of assessee:- A.Y Income Declared Income Assessed u/s 143(3) Status of proceedings 2006-07 7,16,440/- 7,16,440/-(28.02.2014) Income Assessed u/s 143(3) of the Act 2007-08 45,82,141/- 45,82,141/-(28.02.2014) Income Assessed u/s 143(3) of the Act 2008-09 3,66,359/- 3,66,359/-(28.02.2014) Income Assessed u/s 143(3) of the Act 2009-10 2,65,639/- 2,65,639/-(28.02,2014) Income Assessed u/s 143(3) of the Act 2010-11 37,08,227 37,08,227/-(28.02.2014) Income Assessed u/s 143(3) of the Act 2011-12 11,28,562/- 11,28,562/- {28.02.2014) Income Assessed u/s 143(3) of the Act 2012-13 4,62,24,040/- 43,23,48,069/- (05.02.2014) Assessment was quashed by the ITAT following RRJ Security judgment in ITA No-2550/Del/2015 2013-14 3,10,05,770/- 3,96,37,197/- Matter is subjudice before the ITAT 10.3 He submitted that the assessments would prove beyond doubt, about the identity and credit worthiness of the loan creditor. So far as comments of PC....
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....s replies on 26.07.2016 and the AO has passed the assessment order on 30.08.2016, which means after one month. 12. So far as the issue of inter corporate deposits are concerned, the ld. Counsel for the assessee referring to the following table submitted that all above deposits were given by assessee in previous years and not in the relevant assessment years:- Party name Amount Date when advance is given Page Number of P8-1 Ambawatta Towers 2,61,000/- 16.12.2009-2,500-AY:2010-11 29.09.2010-200000 --AY:2011-12 22.11.2011-5802-AY: 2012-13 160 of PB-1( All these years were assessed u/s 153C read with 143(3) SS Greens Homes Pvt Ltd 8,41,05,000/- First four entries of Pg-161 are of AY 2011-12 and rest of the entries of Pg 161-162 are of AY 2012-13 161-162 of PB-1, all the AY were assessed u/s 143(3) Sunil Kumar 15,00,000/- 14.08.2012- AY 2013-14 Assessment was framed u/s 143(3} of the Act. Tauras Build well 16,54,22,176/- AY2011-12& 2012-13 164-165- Sigma Infracon 52,50,000/- 19.02.2008- 50,00,000- AY 2008-09 11.03.2008- 2,50,000 AY 2008-09 12.1 On the contrary it is an admitted position of fact that in ....
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....ion 68 are not applicable as held in various decisions that provisions of section 68 are not applicable for opening balances. In fact in assessee's own case the ITAT while deciding the appeal of AY 2012-13 has taken this view. Therefore the PCIT's approach is patently wrong. Hence view of the AO cannot be termed as erroneous or prejudicial to the interest of revenue. b. All previous years were assessed u/s 153C read with 143(3) and there is not a single document which would show that what assessee has received was his unaccounted money advanced by assessee in previous years and received back in impugned year. Therefore it cannot be alleged that AO has passed the assessment order without looking into the facts properly and his view cannot be termed as erroneous & prejudicial to the interest of revenue. 12.5 He submitted that again on Page Number -6 of the impugned order the PCIT has held that genuineness/ credit worthiness of the amounts received back from the aforesaid parties has not been examined. He submitted that so far as the present year is concerned AO was not empowered to invoke the provisions of section 68 to advances received back during the years. And for pre....
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....tted that assessee was in possession of huge interest free funds, to the tune of Rs. 4.44 crore and the outstanding advances of the current year were only 51.50 lakhs. Therefore, in view of the decision in the case of Reliance Utility and others reported in 313 ITR no disallowance is permissible and hence the view of the AO for not making any disallowance was plausible. So far as finance cost is concerned, he submitted that finance cost is nothing but the interest paid by assessee on car loan. This amount is coming from previous year (Page No.195 of PB-1). He submitted that the assessee company has incurred following car loans and the finance cost is attributable to them Amount of Loan Initially Date on which taken Opening balance for impugned year Relevant Page No- Interest paid in present year 54,90,000/- 15.02,2012-(AY 2012-13) 44,45,612.30/- Page No-12-13(Figure at Serial - 14) 4,19,722/- 63,50,000/- 15.02.2020(AY 2012- 13) 51,42,132/- Pg no-15 Figure at Sr Number-14 485714/- 75,00,000/- 01.07.2012(AY-2013- 14) 58,73,595/- Pg No-17- Item number-9 586631/- Total interest paid 14,92,06....
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....uct further enquires by himself and he cannot simply set aside the order of the AO for further enquiries. For the above proposition he relied on the following decisions:- a. CIT Vs DG Housing 343 ITR 239(Del); b. Commissioner of Income Tax vs. Sunbeam Auto Ltd. (2011) 332 ITR 167 (Del), c. D.K.Associates in ITA No.5659 of 2016 dated 16.01.2017; 13.5 The ld. Counsel for the assessee accordingly submitted that: a.The order of assessment against which the impugned action of 263 is challenged was barred by limitation and hence the jurisdiction of 263 was also barred by limitation. b. On merits the case of the assessee is that the AO has examined each and every aspect of the balance sheets and profit and loss account with documentary evidences and the observation of the PCIT that order is passed without proper enquiries is not tenable since the AO has issued a detailed questionnaire during original proceedings and replies were filed by assessee in respect of those questions. 13.6 The ld. Counsel for the assessee has argued that appeal of the assessee be allowed both on merits and law point 14. The ld. DR, on the other hand, strongly ....
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....appears from the record, and what are the issues inquired into during scrutiny assessment, indicate the briefest of reasons, accepting or rejecting any argument. 7. The Hon'ble Delhi High Court in the case of BSES Rajdhani Power Ltd vs. PCIT dated 08.11.2017 in ITA No 387/2017 has held that the non-consideration of the larger claim of depreciation and the consideration of only a part of it by the Assessing Officer, who did not go into the issue with respect to the whole amount, was an error, that could be corrected under Section 263. 8. In the case of CIT v Amitabh Bachchan (2016) SCC Online SC 484, the Hon. Supreme Court has held that the failure to issue notice on any particular issue does not vitiate the exercise of power under Section 263, as long as the assessee is heard and given an opportunity. It has been held by the Hon Court that once such satisfaction (of the order being erroneous and prejudicial to revenue) is reached, jurisdiction to exercise the power under Section 263 would be available with the CIT subject to observance of the principles of natural justice which is implicit in the requirement cast by the Section to give the assessee an opportun....
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....it in the submission of the ld. counsel for the assessee that the present assessment should have been framed by the AO having jurisdiction after cases were centralized i.e., the AO of Central Circle-I, Faridabad whereas the impugned assessment order has been framed by the DCIT, Central Circle-I, Gurgaon and, therefore, the order becomes bad in law. Further, once it is held that the present assessment year i.e., A.Y 2014-15 is the year of search, then the limitation for completion of assessment in the instant case expires on 31.03.2016. 15.1.1 Since the AO in the instant case has passed the order on 30.08.2016, therefore, the same is barred by limitation. Further, since the AO has not issued the mandatory notice u/s 153C and has passed the order u/s 143(3) and has not obtained any approval from the JCIT before passing the order for the impugned assessment year which is the search year as held by the Tribunal in assessee's own case in the immediately preceding years, therefore, the order is bad in law. Once it is held that the original order passed by the AO is without jurisdiction being passed by the wrong AO, barred by limitation being passed after 31.03.2016 and bad in law bein....
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....n interest free advances to sister concerns is concerned, it is an admitted fact that most of these advances were given in the preceding years and no such disallowances were made in the assessments completed. Further, the own capital and free reserves were much more than the interest free advances given to sister concerns. Therefore, we find merit in the arguments of the ld. counsel for the assessee that there is no error in the order of the AO on this issue. 15.7 So far s the credits received from Mr. Vinod Ambawatta is concerned, it is an admitted fact that assessments of the above person were done by the same AO u/s 153C who has passed the order in the case of the assessee. Assessee has filed all the relevant details such as confirmations, proof of identity, copy of ITR, bank details, etc. to prove the ingredients of provisions of section 68 in response to the letter of the AO. Under these circumstances, it cannot be said that the AO has not made any enquiries especially when the assessee as well as Mr. Vinod Ambawata were assessed by the same AO. 15.8 We find, the Hon'ble Delhi High Court in the case of CIT vs. D.G. Housing (supra) has held as under:- "The Assess....
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....ch matters, to remand the matter/issue to the Assessing Officer would imply and mean the CIT has not examined and decided whether or not the order is erroneous but has directed the Assessing Officer to decide the aspect/question. This distinction must be kept in mind by the CIT while exercising jurisdiction under section 263 of the Act and in the absence of the finding that the order is erroneous and prejudicial to the interest of Revenue, exercise of jurisdiction under the said section is not sustainable. In most cases of alleged "inadequate investigation", it will be difficult to hold that the order of the Assessing Officer, who had conducted enquiries and had acted as an investigator, is erroneous, without CIT conducting verification/inquiry. The order of the Assessing Officer may be or may not be wrong. CIT cannot direct reconsideration on this ground but only when the order is erroneous. An order of remit cannot be passed by the CIT to ask the Assessing Officer to decide whether the order was erroneous. This is not permissible. An order is not erroneous, unless the CIT hold and records reasons why it is erroneous. An order will not become erroneous because on remit, t....
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....pecifically pointed out which of the inquiries or verification should have been carried out by the AO in this regard and the AO failed to carry out those inquiries and verification as desired by the Principal Commissioner. 15.11 It has been held in various decisions that for invoking the provisions of section 263, the order passed by the AO must be both erroneous and prejudicial to the interest of the Revenue. The twin conditions must be satisfied. Absence of any one condition cannot empower the PCIT to invoke jurisdiction u/s 263 of the IT Act, 1961. The order passed by the AO in the instant case may be prejudicial to the interest of the Revenue but cannot be termed as erroneous in view of our discussion on various issues in the preceding paragraph. Further, even after giving details before the PCIT in response to his notice u/s 263 the PCIT has not examined the details himself and came to a definite conclusion but has merely set aside the matter to the file of the AO for denovo assessment which is not in accordance with law as held by Hon'ble Delhi High Court in the case of Sunbeam Auto Ltd. (supra). The various decisions relied on by the ld. DR are distinguishable and not app....